U.K. Banks Urge Government to Counter EU Influence Threat

By Jim Brunsden -
Jun 25, 2014

British banks have urged the
government to stave off risks to its influence in European Union
financial-services rule-making amid deeper integration of the
euro area.

The U.K., whose opposition to EU banker-bonus curbs was
rebuffed last year, faces challenges including new voting rules
that give the euro area an automatic majority in decision-making, according to a report by the British Bankers’
Association obtained by Bloomberg News.

“Understandable moves toward stronger euro-zone governance
may make it more difficult for the U.K. financial sector to play
a full role” in the EU single market, according to the BBA,
which represents U.K. lenders and other banks active in the
country. “Euro-zone caucusing, outside the EU-28 format, on
matters that impact directly the single financial market could,
even unwittingly, damage its integrity.”

U.K. Prime Minister David Cameron has been forced on to the
back foot by other EU leaders is his opposition to the
appointment of former Luxembourg Prime Minister Jean-Claude Juncker as the next president of the European Commission, the
EU’s executive arm. The clash is the latest in a series of
battles that include Cameron’s 2011 veto of a planned fiscal
treaty after he failed to secure powers to block future EU
financial regulations.

Legal Challenges

The U.K. has also undertaken a series of legal challenges
against EU measures adopted in response to the financial crisis,
ranging from centralized powers to ban short selling to a ban on
bonuses worth more than twice fixed pay and a proposed
financial-transaction tax.

While “the euro zone will need to develop the necessary
working structures to deal with internal euro-zone issues,”
this shouldn’t be done in a way that creates “divisions in
single-market decision-making,” according to a cover letter
from Anthony Browne, the BBA’s chief executive officer. The
report has been sent to the U.K. government and political
parties.

New double-majority voting rules that apply from Nov. 1
will mean that the 18 euro-area countries will be able to muster
a “clear majority” when it comes to decisions on EU laws,
according to the report.

The appointment of a full-time president of the Eurogroup,
the name given to meetings of euro-area finance ministers, is a
“likely political outcome” once the term of the current
president, Dutch Finance Minister Jeroen Dijsselbloem, expires
next year, according to the report.

“The full-time president will be a significant step and
should either be avoided or guarantees put in place for
mitigating its impact,” the BBA said.

Other challenges for the U.K. include the departure of key
British members of the European Parliament’s Economic and
Monetary Affairs Committee, and a potential relocation of
responsibility for financial services rule-making within the
commission.